Outlook for interest rates and property prices

I recently caught up with the team at ausbiz TV to talk about the current state of the real estate market and where we see prices going next year. My underlying outlook hasn’t changed since October last year, but what I have noticed is the impact that higher rates are having on construction activity that often goes unnoticed.

The global real estate market is going through a freeze at the moment, construction activity is falling because materials, labour and finance are all expensive and key ingredients in real estate development.

This is providing a floor to prices, particularly in large metro cities where migration is starting to rise. Higher rents are a response to higher interest rates.

Residential real estate prices have stopped falling are now rising. If anything, higher interest rates are causing housing inflation, but that’s a story that I’ll explore with more data in the coming months.

For now, I want to share a video of my chat below. Click the link to watch.

In the next couple of weeks I’ll also be watching the fallout from the US commercial real estate market as more properties start transacting. The office market is the biggest individual risk.

Peter Esho is an economist and Founder of Esho Group. He has 20 years of experience in investments and markets.